GrubHub is not a food delivery company, says COO

GrubHub COO Stan Chia took the stand today in the company’s trial surrounding its practices of employing 1099 independent contractors to make deliveries.

In Chia’s testimony, GrubHub lawyer Theodore Boutrous focused on the element of the Borello test — which aims to determine if a worker is an independent contractor or W-2 worker — that looks at whether or not delivery is part of the company’s core business. According to Chia, delivery is not part of GrubHub’s core business and it never has been.

When asked if GrubHub considers itself to be a “food delivery company,” Chia responded, “No, we do not.”

“It is still to be the premiere marketplace connecting diners with restaurants,” Chia said.

Chia spoke about the value of GrubHub as a marketing and discovery tool for restaurants, noting how GrubHub enables diners to discover restaurants they wouldn’t otherwise know about.

GrubHub began testing food delivery in 2014, 10 years after it launched. In 2015, GrubHub officially started offering delivery as a service to restaurants that don’t have their own delivery services.

“It’s a service we built out at the request of restaurants,” Chia said.

GrubHub merged with Seamless in 2013 and announced its intent to buy Eat24 just last month — two companies that also offer on-demand delivery. Still, Chia said the company is focused on the marketplace aspect of the business and is “not proactively trying to grow” the delivery portion of the business.

He went on to talk about GrubHub’s business in California, and how GrubHub only facilitates delivery in five of the 200+ markets in which it’s active. He said the delivery portion makes up a minority of GrubHub’s overall business.

In fact, he said “we lose money and we cannibalize our profits on the delivery portion of the business.”

In cross-examination, the plaintiff’s lawyer, Shannon Liss-Riordan, asked why GrubHub’s acquisition strategy seems to suggest it highly values on-demand delivery companies. Chia noted that Eat24 doesn’t facilitate deliveries, but rather relies on the restaurant to supply their own delivery people.

“I don’t know that I would say we’re doing any of this to grow a delivery business,” Chia said.

Though, the majority of customers who order food through GrubHub have it delivered. And the majority of those delivery orders are handled by restaurants.

In cross-examination, Liss-Riordan referenced something Chia said in his testimony about how drivers like being independent contractors.

“We listen to our driver base and that is what we have overwhelmingly heard,” Chia told Liss-Riordan.

Liss-Riordan then brought up a different lawsuit in which more than 7,000 GrubHub drivers are saying they were improperly classified as 1099 contractors. She asked if Chia was aware of that, to which he said he was not personally aware of the number of claims.